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Basically insurance in finance is a form risk management under various fields. Insurer, premium, policyholder and insurance rate are few terminologies which are important to be known. Apart, there are two types of economies in the society. First one is very ancient and followed by our forefathers. We call it as a non-money economy. Insurance is in the form of people helping each other. For example, if a person is not well he is cared by the people of the village. Second type of insurance is related to money with markets, financial instruments, etc. Insurance can be of any kind that protect against risks. Health, life, auto, home, accident, property insurances are the types available largely. The insured entities are protected for a fee. There are basic legal requirements for an insurer. Automobile insurance provides liability, property and medical coverage. Basically it is an agreement between the person who agrees to pay the premium and the company who agrees to pay financial loss.
Home insurance includes damage or destruction of a home from disasters like flood and earthquakes. Health care insurance covers the cost of medical treatments. Dental insurance is coverage to protect them against dental costs. Insurance policies are also available for unemployment issues. Life insurance is mostly covered by all. It provides a monetary benefit to the decedent’s family. Life insurance may also provide income to an insured person’s family, burial, funeral and other final expenses. Property insurance protects against risks to property like fire, theft or weather damage. Also includes fire insurance, flood insurance and earthquake insurance.
Liability insurance is a very broad that covers legal claims against the insured. Mortgage insurance is basically a form of credit insurance. Pet insurance, locked funds insurance, kidnap and random insurance, travel insurance, phone insurance are the other types of insurance. Insurance companies are widely classified as life insurance companies and general insurance companies. There are few controversies like religious concerns in the insurance field. Redlining is another practice in specific geographic areas because of high loss. They deny insurance coverage in such areas.
One should take care of such controversies before agreement. Insurance can also purchased through an agent. One particular agent has the rights to represent more companies at a time. The fee is paid on commission basis either directly or indirectly from the company. Reinsurance companies sell their policies to very large companies. Captive companies work for their patent groups for a specific aim of risks. Financial strength plays a major role for a contract. Majority of the companies had enough capital to absorb losses. Any act done with an intension to get the amount from an insurer is insurance fraud. The crimes are severe and diverse.
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Gratuity is a statutory liability of the employers. This is an incremental liability which accrues to an employee for every year of service put in by him. In the Group Gratuity Scheme granted by LIC, in the event of premature death of the member, the dependent can get an amount which will be equal to the gratuity payable on the normal retirement of the member, had he survived up to the date of superannuation. Apart from the above the advantage of LIC’s group gratuity schemes are free valuation of the liability, guidance in drafting Trust Deed and Rules of the scheme, secutiry for the fund, attractive return, lower premium for the insurance, optional ciritical illness rider benefit against major diseases, periodical information about the status of fund, simple administrative and claim settlement procedures, tax concessions, etc.,
Group Superannuation scheme is designed to provide pension to the employees/beneficiaries on the exit of the member from the service. A decreasing group insurance cover in conjunction with the superannuation benefit can also be provided to supplement the lower accumulation in the event of premature death of the member. The scheme is of two types: a) Money purchase scheme and b) Benefit purchase scheme. Pension which is linked to the dearness allowance will also be granted. The LIC’s group superannuation scheme out are easy to install and provides best service, free valuation of the liability, attractive returns, safety of funds, simple administrative procedures, periodical statement on the fund position, tax, concession, etc. LIC offers a wide range of benefit options to cater to the needs of the different beneficiaries.
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Protection: Savings through life insurance guarantee financial protection against risk of death of the policy holder. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.
Aid to thrift: Life Insurance encourages ‘thrift’. Long term saving can be made in a relatively ‘painless’ manner bacause of the ‘easy installment’ facillity (premiums can be paid through monthly, quarterly, half-yearly or yearly instalments). The salary savings scheme, popularly known as SSS, provides a convenient method of paying premium each month through deduction from one’s salary. The employer remits the deducted premium to the LIC. The salary savings scheme can be introduced in an institution or establishment subject to specified terms and conditions.
Liquidity: Loans can be raised on endowment type and whole life policies as per policy conditions on the sole security of a policy which has acquired a paid-up level. Besides, a life insurance policy is also generally accepted as security for even a commercial loan/housing loan.
Tax Relief: Tax Relief in income Tax is available for amounts paid by way of premium for life insurance subject to the income tax rules in force. Assesses can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for his intance than he would have to pay otherwise.
Money when you need it: A suitable insurance plan or a combination of different plans can be taken to meet specific needs that are likely to arise in future, such as children’s education, start-in-life or marriage provision or even periodical needs for cash over a predetermined stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one’s retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. LIC pension plans also offer regular income in the form of an annuity when you retire from active work or in a later part of life at your choice leaving a lump sum purchase price for your heirs. Subject to certain conditions, loans are granted to policy holders for house-building or for purchase of flats.
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In the event of the death of the policyholder, the claimant (the nominee, assigner or next of kin) should immediately intimate the fact of such death to the Branch Office where the policy is serviced, along with the following particulars to help the corporation to consider the claim promptly.
(a) Policy number/s, (b) name of the life assured, (c) date of death and (d) claimant’s relationship with the assured.
Soon on receipt of the intimation of death, the Branch office concerned will send the necessary claim forms for completion along with instructions regarding the procedure to be followed by the claimant. The claim is usually payable to the nominee/assignee or the legal successor, as the case may be, However, if the deceased policyholder has not nominated/assigned the policy or if he/she has not made a suitable provision regarding the policy moneys by way of a will, the claim is payable to the holder of a succession certificate or some such evidence of title from a court of law. The corporation, however, may consider settlement of caims under such policies without insisting on legal evidence of title in favor of the natural heirs of the deceased subject to certain terms and conditions, to take care to see that the claim is paid to the correct persons.
The corporation grants claims concessions whereby payment of full sum assured is made, subject to the deduction of unpaid premiums with interest, and premiums falling due before the next anniversary of the policy, in the event of the death of the life assured within a period of six months or one year from the date of the first unpaid premium, provided premiums have been paid at least for three years or five years respectively.
The corporation also provides relief to the claimants under certain plans where, subsequent to the payment of premiums for two full years but less than 3 yeras, death takes place after the days of grace but within one year from the date of first unpaid premium.
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A contract of insurance is a contract of utmost good faith technically known as uberrima fides. The principle of disclosing all material facts is embodied in this important concept which applies to all forms of insurance.
The proposer, who is one of the parties to the insurance contact, has means of knowledge which are not accessible to the insurer viz. the corporation which is the other party to the contact. Therefore, it becomes the duty of the proposer to inform the insurer of everything likely to affect the judgment of the insurer, however unimportant it may seem to him/her (the proposer). Hence, the proposer should ensure that all questions in the proposal form are correctly answered.
It may be noted that in the ‘Proposal’ along with other related papers and the representation made for the grant of insurance, the proposer declares that he is furnishing full and correct information. Any misrepresentation, non-disclosure of facts/information which is material to acceptance of risk, or fraudulent information in any document leading to the acceptance of the risk will render the insurance contract null and void. In such an event, there is the possibility of the contract becoming invalid. Hence it is in the interest of the Policyholder and his dependants to give the correct and full information to secure the precious benefits of the insurance policy for his near and dear.